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ACRA, Van der Horst Energy and FRS102

What happened?The Accounting and Corporate Regulatory Authority (ACRA) has requested Catalist-listed Van der Horst Energy (VDHE) to restate its financial statements for fiscal 2008 on grounds that options granted to two executive directors should have been treated as an equity-settled share-based payment under a financial reporting standard (FRS).

ACRA confirmed that this is the first time it has directed a listed company to restate its financial statements under such circumstances.

What is the rule?FRS102 ruled that every company that granted stock options have to account for them as a business expense in its income statement, instead of merely just having to mention them as a note in the annual report.

What is the implication?After taking the fair value of the share options of $5.7 million as business expense, VDHE would now report a pre-tax loss of $2.83 million, instead of the pre-tax profit of $2.87 million that were earlier stated.

ACRA was not prepared to sit back and accept the auditor’s qualification of the accounts on the basis of non-compliance with FRS102. ACRA has now ruled for restatement of the financial statements.